Download Hoover and the Great Depression

Big Government Herbert Hoover Makes the Depression Great
Robert P. Murphy, The Politically Incorrect Guide to the Great Depression and the New Deal
(Washington, DC: Regnery Publishing, Inc., 2009), 27–62.
• Herbert Hoover didn’t believe in laissez-faire.
• Hoover’s big-government policies created the Great Depression
• Many of the “revolutionary” policies of the New Deal were in fact inaugurated under Hoover.
In order for the deification of FDR and his New Deal to make any sense, it is necessary to cast Herbert Hoover as a
“do-nothing” reactionary, hiding behind the Constitution while the people suffered. Yet nothing could be further from the
truth. As Hoover explains in his memoirs:
With the October-November stock-market crash the primary question at once arose as to whether the President and
the Federal government should undertake to mitigate and remedy the evils stemming from it. No President before had
ever believed there was a governmental responsibility in such cases. No matter what the urging on previous
occasions, Presidents steadfastly had maintained that the Federal government was apart from such eruptions; they had
always been left to blow themselves out. Presidents Van Buren, Grant, Cleveland and Theodore Roosevelt had all
remained aloof.…
Because of this lack of government experience, therefore, we had to pioneer a new field. As a matter of fact there
was little economic knowledge to guide us.1
It is ironic that Hoover believed the above passage provided evidence for his innocence in the matter. It’s rather as if a
doctor dismissed a remedy that always worked—letting time heal economic wounds—in favor of massive drug
intervention, never before tried. Not only did these drugs not work, they made the patient sicker than he’d ever been in his
life. But Hoover did not come to the logical conclusion that he had made a mistake. Instead, he simply took it for granted
that the failure of his new remedies only proved how bad the situation must have been; it was inconceivable to him that
his policies made the situation so bad. Hoover’s unshakeable conviction in the need for activist government—even after
having decades to reflect on the subject—is evident in his Memoirs and how he treats Andrew Mellon:
[After the stock market crash, two] schools of thought quickly developed within our administration discussions.
First was the “leave it alone liquidationists” headed by Secretary of the Treasury Mellon, who felt that government
must keep its hands off and let the slump liquidate itself. Mr. Mellon had only one formula: “Liquidate labor,
liquidate stocks, liquidate the farmers, liquidate real estate.” He insisted that, when the people get an inflation
brainstorm, the only way to get it out of their blood is to let it collapse.… He said: “It will purge the rottenness out of
the system. High costs of living and high living will come down. People will work harder, live a more moral life.
Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.” …
At great length, Mr. Mellon recounted to me his recollection of the great depression of the seventies which followed
the Civil War.… He told of the tens of thousands of farms that had been foreclosed; of railroads that had almost
wholly gone into the hands of receivers; of the few banks that had come through unscathed; of many men who were
jobless and mobs that roamed the streets. He told me that his father had gone to England during that time and had cut
short his visit when he received word that the orders for steel were pouring toward the closed furnaces; by the time he
got back, confidence was growing on every hand; suddenly the panic had ended, and in twelve months the whole
system was again working at full speed.2
Note here the strength of Mellon’s position. He didn’t cherry pick his anecdotes by focusing on a mild downturn. On
the contrary, he was recalling what had been, at that time, the longest depression in U.S. history. (According to the
National Bureau of Economic Research, the contraction officially lasted from the third quarter of 1873 through the first
quarter of 1879, about five and a half years.3) Even so, the “liquidationist” medicine eventually worked, and recovery
kicked in apparently much faster than many observers had expected. Inasmuch as the 1930s depression turned out far
worse—and lasted for twice as long4—after Hoover rejected Mellon’s advice, one might think Hoover, in retrospect,
would have given more credence to Mellon’s counsel. But immediately following the passage above Hoover writes:
I, of course, reminded the Secretary that back in the seventies an untold amount of suffering did take place which
might have been prevented; that our economy had been far simpler sixty years ago, when we were 75 per cent an
agricultural people contrasted with 30 per cent now; that unemployment during the earlier crisis had been mitigated
1. Herbert Hoover, The Memoirs of Herbert Hoover: The Great Depression, 1929–1941 (New York: The Macmillan
Company, 1952), 29.
2. Ibid., 30–31.
3. The National Bureau of Economic Research maintains the official dates of U.S. business cycles at this location: http://
wwwdev.nber.org/cycles/cyclesmain.html. (Accessed January 14, 2009.) We warn the reader that it is not entirely clear
from Hoover’s anecdote that Mellon was referring to the 1873–1879 depression, because there were two fairly short
contractions (as dated by the N.B.E.R. from 1865–1867 and 1869–1870. These two would obviously fit the “followed the
Civil War” description too, but given the explicit description of “the great depression during the seventies” and the
severity described by Mellon, we think he is probably referring to the long depression of 1873–1879.
4. According to the N.B.E.R.’s method of dating contractions, the 1870s episode is still the longest on record, but this is
because the N.B.E.R. considers the economy to have been in recovery from 1933 until the next contraction hit from
1937–1938. But since the unemployment rate did not fall below 14 percent until the 1940s, we are siding with the man on
the street view that “the Depression” lasted throughout the entire 1930s, and hence was much longer than the 1870s
depression.
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by the return of large numbers of the unemployed to relatives on the farm; and that farm economy itself had been
largely self-contained. But he shook his head with the observation that human nature had not changed in sixty years.
Secretary Mellon was not hard-hearted.… He felt there would be less suffering if his course wer pursued. The real
trouble with him was that he insisted that this was just an ordinary boom-slump.…5
Secretary Mellon was right: had Hoover followed the practiced of his predecessors, we would not remember him today
as presiding over the worst economic calamity in U.S. history. (Quick! Who was president during the depression of the
1870s when Mellon’s strategy was heeded?) And though we can quibble about the word “ordinary,” Mellon was also
correct in saying that the depression would have been a boom-slump, comparable to all earlier ones, if only Hoover’s
administration had pursued the same laissez-faire approach that all earlier administrations had followed.
The stock market and economy in general were already deep into an unsustainable boom when Herbert Hoover took
office. In that sense, a bust and the ensuing small “d” depression were unavoidable, no matter what Hoover did in office.
But Hoover tried to fight the depression with policies so destructive that, in retrospect, one almost wonders if he were a
Soviet agent sent to undermine the American economy.
On one point at least, the liberal historians are party right. Herbert Hoover made the depression in the 1930s great—but
he did so by following the very policies they support. Hoover’s policies created the Great Depression precisely because he
abandoned the laissez-faire approach that he himself acknowledged all earlier presidents had followed when faced with
similar circumstances.
Herbert Hoover: Consistent Critic of Capitalism
The skeptical reader can rest assured that Hoover’s claims to have rejected Mellon’s “liquidationist” advice were not
merely self-serving lies penned kin his diary after the fact. On the contrary, Herbert Hoover was a consistent critic of
unfettered capitalism throughout his career in the government, even during the Roaring ’20s when the (relatively) free
market was working wonders. His documented actions of the time, as well as the reports of contemporaries—including
labor leaders—prove that Herbert Hoover was not the free market ideologue people think he was. In fact, he often butted
heads with his boss, Calvin Coolidge, who was a far better (though still impure) exemplar of the “small government
fanatic” whom leftists love to ridicule. (We note in passing that laissez-faire Coolidge presided over a booming economy,
while activist Hoover’s economic record was decidedly subpar.)
Our brief chronicle of the early Hoover begins in 1919, when he was appointed by (Democratic) President Wilson to
direct a conference on labor-management relations. This conference ultimately issued many “progressive”
recommendations, including an expansion of collective bargaining, a reduction in work hours, the abolition of child labor,
and national old-age insurance. Hoover himself endorsed these recommendations, and noted that the “extreme right”
(composed of groups such as the Boston Chamber of Com-merce) opposed the ideas.
In 1921 (Republican) President Harding appointed Hoover as Secretary of Commerce. During the postwar depression
of 1920–1921, Hoover “set out to reconstruct America” (his words) and urged Harding to establish the President’s
Conference on Unemployment. Looking back on not just this conference but earlier efforts, Hoover wrote:
We developed cooperation between the federal, state, and municipal governments to increase public works. We
persuaded employers to “divide” time among their employees so that as many as possible wold have some incomes.
We organized the industries to undertake renovation, repair, and, where possible, expand construction.6
Throughout 1921, Hoover did what he could to persuade Congress to enact public works programs to stabilize the
economy. Fortunately, the depression ended before Hoover’s grandiose plans could be realized. (His prescriptions wold
have to wait until his own presidential administration to show their potency.) Other notable “accomplishments” included
Hoover’s successful campaign against U.S. Steel, winning a reduction from 12- to 8-hour workdays in 1923, and his role
in the 1926 passage of the Railway Labor Act, which Murray Rothbard describes as “America’s first permanent incursion
of the Federal government into labor-management relations.”7
Hoover’s “New Economics”
To make sense both of Hoover’s presidential actions and his (much later) recollections of the Great Depression, we
need to understand the economic worldview that guided him. Hoover had been converted to a supposedly enlightened
“new economics” that he believed would prevent the need-less suffering that had typified all earlier depressions. As
Hoover explained in a speech on May 12, 1926:
[N]ot so many years ago—the employer considered it was in his interest to use the opportunities of unemployment
and immigration to lower wages irrespective of other considerations. The lowest wages and longest hours were then
conceived as the means to obtain lowest production costs and largest profits.… But we are a long way on the road to
new conceptions. This very essence of great production is high wages and low prices, be-cause it depends upon a
widening … consumption, only to be obtained from the purchasing-power of high real wages and increased standards
of living.8
Hoover’s words are remarkably “modern,” and in fact anticipated the allegedly revolutionary Keynesian analysis that
5. Herbert Hoover, The Memoirs of Herber Hoover: The Great Depression, 1929–1941 (New York: The Macmillan
Company, 1952), 31.
6. Hoover quoted in Murray N. Rothbard, America’s Great Depression, Fifth Edition (U.S.A.: The Ludwig von Mises
Institute, 2008), 190.
7. The early history of Hoover relies heavily on Murray N. Rothbard, America’s Great Depression, Fifth Edition (U.S.A.:
The Ludwig von Mises Institute, 2008), 188–207.
8. Hoover quoted in Murray N. Rothbard, America’s Great Depression, Fifth Edition (U.S.A.: The Ludwig von Mises
Institute, 2008), 205.
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would sweep the world a decade later. Hoover’s view reflected the popular misconception that cyclical downturns were
the result of “overproduction” and “underconsumption.” In short, if business got ahead of itself and produced too much
stuff, and at the same time kept its prices too high and/or paid its workers too little, then it was clearly impossible for the
community as a whole to afford all of the pro-duct. Sales would fall off, inventory would accumulate, and the businesses
would need to do something.
Now here is where the “new economics” come into play. Left to their own self-seeking devices, businesses would
respond to a downturn by slashing the prices they charged, yes, but also by slashing costs, through cutting wages and/or
laying workers off. But ironically, so Hoover and his fellow underconsumptionists believed, trying to pin the belt-tightening on the workers was self-defeating. An individual firm might enhance its bottom line by cutting its wage payments
more than its prices. But if all firms try to employ this strategy at the same time, Hoover thought, then they will clearly
fail, because it is after all the workers who use their paychecks to pay for the products these businesses were trying to sell.
In other words, by slashing wages, firms were undercutting their own collective customer base and the demand for each
other’s products. In the famous rule favored by Henry Ford and other “enlightened” businessmen at the time: “You have
to pay the worker enough to buy back the product.”
Given Hoover’s diagnosis of the sickness, his cure for an economic downturn makes perfect sense. If workers aren’t
earning enough to buy all the products generated by businesses, then the obvious remedies are to boost workers’ buying
power and restrict production. As president, Hoover’s policies achieved precisely these goals. He successfully urged
businesses to keep wage rates constant even while they were forced to cut their prices—meaning that workers’ pay-checks
would go further and buy more products—and his signing of the infamous Smoot-Hawley tariff (1930) was based on his
desire to support farmers’ incomes. Hoover’s long-standing support for public works projects during a depression is also
understandable as a means to prevent in-comes from collapsing precisely when businesses are suffer-ing from a fall in
demand for their products.
True to his theory, Hoover not only wanted to bolster consumption, but he also sought to “close the gap” by restricting
production. As president, Hoover ordered a massive increase in the deportations of immigrants. He supported spread-thework schemes, whereby struggling businesses wouldn’t lay off the most inefficient workers, but would rather maintain
staff levels with shortened workweeks. He even attributed partial blame for the hard times on the introduction of “laborsaving devices,”9 appealing to the Luddite fallacy that new machines are a curse because they throw people out of work.
In light of his writings as well as his policies, Hoover clearly thought there was a fixed amount of work to be done in the
economy, and he further believed that this delicate balance could be upset if the more capable employees worked too
long, or if new immigrants and new machines “took jobs” from everyone else.
Though understandable—they infect our political leaders and financial pundits to this very day—Hoover’s theories wer
completely fallacious. High wages do not cause prosperity, they are rather an indication of prosperity. Ultimately, it
doesn’t matter how many green pieces of paper employees had out to workers. Unless workers have first physically
produced the goods (and services), there will be nothing on the store shelves for them to buy when they attempt to spend
their fat paychecks.
Hoover was correct in his 1926 speech to note that American workers enjoyed both higher “real wages” (mean-ing
money-wages compared to the cost of living) and a higher standard of living than workers in other countries. But
American workers were paid more by their employers because they produced more. No matter how “enlightened”
business leaders in Mexico were, they could not possibly have given their employees the same purchasing power as their
counterparts to the north. This is because, on average, Mexican workers were not as productive, and so in their role as
consumers it was a physical impossibility that they could acquire the same amount of goods per capita as Americans. If
more stuff is produced within America than within Mexico, obviously Americans are going to have a higher standard of
living, regardless of “wages policy.”
The simple formula of paying the workers “enough to buy back the product” overlooks the fact that there are people
other than employees who make up the economy. Most obvious are the entrepreneurs and shareholders who own the
businesses that employ “the workers.” But there are also the owners of all resources beside labor. The workers at an automobile plant don’t crank out thousands of cars with their bare hands. Rather, their raw labor is augmented (and
tremendously so) by the building site, steel, rubber, tools, and assembly line contributed by other people, and by the
organizational talent of the manager overseeing the operation. If the auto workers received total wages equal to the total
prices of all the cars that passed through their hands, then the firm in question would have no money left over to pay its
suppliers. But this in turn would mean no demand for the products fo the tire producers, and hence no way for the tire
manufacturer to pay his workers.
Even on its own terms, Hoover’s philosophy of high wages to support “purchasing power” makes no sense. It fails at
the first step in the argument: If hard times hit and cause an employer to ask his twenty employees to accept a pay cut of
$10 per week, this doesn’t mean $200 worth of “demand” has suddenly disappeared from the system. The reduction in
total weekly paychecks is exactly counterbalanced by the employer’s earnings, which are now $200 higher than they
would have been without the pay cut. (Of course, even with the pay cut, the business’s earnings would be lower in a
depression than they were during the boom period, but we are here look-ing at the impact of the wage cut per se.) Hoover
was quite simply wrong when he said that cutting wages would reduce the demand for products in general; Hoover
missed the fact that wage cuts give employers the means to increase their spending (either on personal consumption or to
invest). It might strike some as unfair that workers should have to shoulder any of the pain during a depression, but it is
patently false to argue that wage cuts reduce the total amount of income available to buy products.
Ironically, Hoover was fully aware that propping up wage rates (amidst falling sales) would mean the other people had
to take the hit. In the presidential campaign of 1932 Hoover boasted of his record: “For the first time in the history of
9. Herbert Hoover, The Memoirs of Herbert Hoover: The Great Depression, 1929–1941 (New York: The Macmillan
Company, 1952), 25.
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depression, dividends, profits, and the cost of living have been reduced before wages have suffered.”10 Yet Hoover did not
make the obvious connection that falling dividends and profits would reduce the “purchasing power” of shareholders. To
reiterate our point: One might say that it’s nicer or fairer for the fat cats to suffer the full loss during a downturn, but it is
simply not true to argue that shielding wages in this way somehow preserves the total demand for products. Urging
employers to give gifts to their employees doesn’t make the community richer as a whole, because the gain to the workers
is perfectly balanced by the loss to the employers.
Beyond the non sequitur upon which it was based, Hoover’s theory overlooked the purpose of falling prices and wages
during a depression. The boom period of the 1920s was partly illusory. The Federal Reserve kept interest rates artificially
low by creating money out of thin air and pump-ing it into the credit markets. Businesses were misled by the false price
signals, and began more long-term projects than could be “funded” by the amount of real savings in the economy. In a
word, the structure of the U.S. (and world) economic system by 1929 was unsustainable.
By focusing on aggregate monetary conditions such as “total wage payments,” Hoover completely overlooked the fact
that real, physical resources had to be rearranged in order to correct the imbalances in the economy. It wasn’t that
“business” was producing too much, but rather that some sectors were producing too much, while other sectors were
producing too little, in light of the economy’s supplies of resources, the skills and desires of its workers, and the tastes of
its consumers.
The only way to rectify the situation—to transform the economy into a sustainable configuration—was to shuffle
workers and resources. Some enterprises had to be shut down immediately, releasing their workers and freeing up the raw
materials they would have consumed had they remained in business. Now in a socialist command economy, if the
dictator suddenly decides he no longer likes the old plan, he can simply draw up a new one, and then order the comrades
at the closed factories to relocate to the expanding ones. There is no period of “unemployment” when everyone serves at
the whim of the dictator.
But in a market economy, workers are free to choose their occupations, and the owners of raw materials can sell their
property to whomever they desire. Yet with this freedom comes the unfortunate necessity of prolonged spells of
unemployment and “idle resources,” when the workers and raw materials are searching for a new home in the complex
economy. In a free market, prices guide everyone towards the configuration where each participant can best contribute
and also reap the most benefits from the division of labor. The industries that need to expand are the ones that can afford
to keep their wages up, and so they attract workers, The industries that need to contract are the ones hit hardest by the fall
in demand, and so they have to slash prices and wages the most, thereby driving workers away.
Herbert Hoover thought it would help workers to tell employers to prop up wage rates during a depression. He was
wrong. The artificially high wages simple ensured that the laid-off workers—those who had been associated with
unsustainable enterprises in 1929—could not re-enter the productive side of the economy. Instead they remained in a
growing pool of idle labor, priced too high for employers to afford. Hoover’s high-wage policy was the first of several
measures he undertook to unwittingly spawn the Great Depression
Making the Depression Great, Step 1: Prop up Wages
True to his “new economics,” after the stock market crash Hoover quickly convened a series of White House
conferences with leading financiers and businessmen, starting on November 18, 1929. He won their agreement to aim for
the maintenance of wages, positions, and investment spending. If this proved impossible, the business leaders would cut
wages more slowly than product prices (meaning profits would take the hit before the workers), and unavoidable
reductions in hours would be spread out among the workers, rather than eliminating positions outright through layoffs.
The business leaders not only agreed—Henry Ford even promised to raise wages—but also appointed their
representatives to a special advisory committee that would coordinate the government-industry response to the crisis. On
December 5 Hoover truthfully told a group of industrialists:
[Your agreement is] an advance in the whole conception of the relationship of business to public welfare. You
represent the business of the United States, undertaking through your own voluntary action to contribute some-thing
very definite to the advancement of stability and progress in our economic life.. This is a far cry from the arbitrary
and dog-eat-dog attitude of the business world of some thirty or forty years ago.11
Hoover would continue this pressure throughout his term. Summarizing his boss’s position (whether or not he
personally thought it wise), Treasury Secretary Mellon explained in 1931:
In this country, there has been a concerted and deter-mined effort on the part of both government and business not
only to prevent any reduction in wages but to keep the maximum number of men employed, and there-by to increase
consumption
It must be remembered that the all-important factor is purchasing power, and purchasing power … Is dependent to a
great extent on the standard of living … That standard of living must be maintained at all costs.12
Economic historians have shown that Hoover and Mellon were not blowing smoke to the voters. What economists call
“real wages” actually rose during the early 1930s, because businesses cut money-wages either not at all or very
reluctantly, while the prices of most goods and services were plummeting. This perversely made labor relatively more
expensive for businesses to hire, and guess what? During a huge economic slump, when the relative price of workers rose
(because of Hoover’s misguided worldview), businesses hired fewer workers. Economists Richard Vedder and Lowell
10. Quoted in Murray N. Rothbard, America’s Great Depression,Fifth Edition (U.S.A.: The Ludwig von Mises Institute,
2008), 321.
11. Hoover quoted in Murray N. Rothbard, America’s Great Depression, Fifth Edition (U.S.A.: The Ludwig von Mises
Institute, 2008), 213. The description of Hoover’s conference relies of Rothbard 210–13.
12. Ibid., 268.
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Gallaway explain:
While the initial increase in unemployment can be largely explained by the productivity shock, the very sharp rise in
unemployment in 1931 was not related to further declines in output per worker. Productivity per worker changed
little, actually rising somewhat.… Money wages fell, but rather anemically. Whereas in the 1920–1922 depression a
roughly 20 percent fall in money wages was observed in one year, the 1931 de-cline was less than 3 percent. By
contrast, prices fell more substantially, 8.8 percent, so real wages actually rose significantly in 1931, and were higher
in that year than in 1929, despite lower output per worker. The 1931 price [declines], accompanied by a failure of
money wages to adjust … seemed to be the root cause of the rise in unemployment to over 15 percent in 1931.13
The comparison with the previous depression of the early 1920s is instructive. Herbert Hoover and his allies in the
labor movement thought it unconscionable that labor should have been “liquidated” during that downturn, to use Andrew
Mellon’s politically incorrect term. Indeed, during that earlier depression it must have seemed unbearable for workers to
see their paychecks slashed by 20 percent in a single year (though other prices were falling too, cushioning the blow). Yet
when the economy must readjust after an unsustainable boom, the prices of resources—including labor—need to change
in order to facilitate the movement of workers to the correct sectors.
We’re in the Money—Too Bad You’re Out of Work
Here’s a shocking statistic: If you managed to keep your job in the Great Depression, your buying power probably
went up—and in fact rose faster than it did diring the boom times. Herbert Hoover’s “high wage policy” was so
successful that in the worst economic crisis in American history, real wages went up at a compounded annual rate of
three percent for the years 1929 to 1933. That was significantly higher than wages rose during the Roaring 20s. Of
course these high wages came at a price: namely high unemployment, as struggling businesses, paying inflated
salaries, couldn’t afford to em-ploy as many workers. The economists Richard Vedder and Lowell Gallaway conclude
that Hoover’s high wages policy “is the root cause for the extraordinary increase in unemployment in the years
following the stock-market crash.” (Richard E. Vedder and Lowell E. Gallaway, Out of Work, 82.)
Things were very bad—briefly— during the earlier depression. The annual unemployment rate peaked at 11.7 percent
in 1921, but it had fallen to 6.7 percent by the following year, and was down to an incredible 2.4 percent by 1923.14 That
is how a market with flexible wages and prices quickly corrects itself after a Fed-induced inflationary boom. But because
the “compassionate” Hoover forbade businesses from cutting wages after the 1929 crash. Unemployment went up and up
and up, hitting the unimaginable monthly peak of 28.3 per-cent in March 1933.15
Making the Depression Great, Step 2: Cripple International Trade
Even the typical U.S. history textbook lays partial blame for the Depression on the infamous Smoot-Hawley Tariff Act
of 1930, which imposed massive tax hikes on Americans who bought imported goods. Throughout the 1920s, Hoover had
felt the government needed to help U.S. farmers, who were not sharing in the prosperity as much as other segments of the
country. After the stock market crash, prices began falling, including farm prices. True to his purchasing power theory of
depressions, Hoover worried that the decline in farm income would exacerbate the crisis. Yet rather than simply asking
American consumers to pay more for food (the way he asked big business to maintain wages), Hoover left nothing to
chance and used the force of government to impose the price hikes. Smoot-Hawley raised taxes on thousands of important
goods to record levels.
Unintended Consequences
“[T]he Smoot-Hawley tariff was a direct attack on our own home economy.… We needed imports to help make our
own industrial products. A tariff hike, therefore, crippled our own leading industries. The tariff on tungsten, for
example, hurt steel; the tariff on linseed oil damaged paint industry. General Motors and Ford were the premier
carmakers of the world, but the Smoot-Hawley tariff increased the duty on over eight hundred items used in making
cars. U.S. automakers, then, took a double hit. First, they sold fewer cares because Europe-ans slapped retaliatory
tariffs on the United States. Second, they had to pay higher prices for hundreds of items needed to make cars. No
wonder American car sales plummeted from over 5.3 million in 1929 to 1.8 million in 1932.” [Burton Folsom, Jr.,
New Deal or Raw Deal? How FDR’s Legacy Has Damaged America (New York: Threshold Editions, 2008), 31–32.]
It is said that the one issue on which virtually all economists agree is that “protectionist” barriers only serve to make
countries poorer. Indeed, more than a thousand economists petitioned Hoover to veto the tariff bill. Part of the disaster of
Smoot-Hawley was the trade war it inspired: other countries retaliated by raising tariffs on U.S. goods The anti-American
backlash included European repudiation of debts incurred during World War I.16
Yet regardless of how other countries responded, Hoover’s decision to strengthen trade barriers made Americans
poorer. It is true that a hike in any single tariff helps the American producers of the good in question, by weakening
foreign competition in that market. But Americans in general are still hurt, because a new tariff simply raises prices for
13. Richard K. Vedder and Lowell E. Gallaway, Out of Work: Unemployment and Government in Twentieth-Century
America (New York: New York University Press, 1997), 81.
14. Ibid., 57.
15. Ibid., 77. We note that the monthly figures are based on Vedder and Gallaway’s model estimates, since monthly
unemployment data was [were] not recorded this early in U.S. history.
16. Burton Folsom, Jr., New Deal or Raw Deal? How FDR’s Legacy Has Damaged America (New York: Threshold
Editions, 2008), 31.
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American consumers trying to buy the good. Moreover, American exporters are hurt by a tariff protecting a particular
U.S. industry, because the extra hurdle to imports means that foreigners have fewer dollars with which to buy American
exports. (Total U.S. exports dropped from $7 billion in 1929 to $2.5 billion in 1932,17 though this fall was partially due to
the general economic decline and to price deflation.) Because the U.S. was a net exporter of agricultural products, hiking
tariff barriers ironically hurt American farmers more than may other producers.
If every individual were forced to grow his own food, sew his own clothes, and build his own home, it would certainly
“create employment”—people would be working fifteen-hour days just to survive. Yet obviously individuals are much
better off by having the option to specialize in one occupation, producing far more than they need personally, and trading
the surplus with others who are doing the same in their own areas of expertise.
The same principle holds for nations. When different countries specialize in their areas of “comparative advantage” and
then trade surplus production with each other, it raises standards of living across the board. It was particularly tragic that
the nations of the world decided to sabotage this wonderful cooperation in the midst of the worst economic downturn in
modern history.
Making the Depression Great, Step 3: Tax-and-Spend Like a Democrat
Part of the myth of the laissez-faire Hoover holds that he mercilessly slashed the government budget in he early stages
of the Depression, because he was wedded to the “classical” free-market doctrines and didn’t realize—as modern
Keynesians do—that governments are supposed to boost spending when the economy goes into a tailspin. This viewpoint
was beautifully illustrated in a December 2008 New York Times column by Nobel laureate Paul Krugman:
No modern American president would repeat the fiscal mistake of 1932, in which the federal government tried to
balance its budget in the face of a severe recession. The Obama administration will put deficit concerns on hold while
it fights the economic crisis.
But even as Washington tries to rescue the economy, the nation will be reeling from the actions of 50 Herbert
Hoovers—state governors who are slashing spending in a time of recession, often at the expense both of their most
vulnerable constituents and of the nation’s economic future.
These state-level cutbacks range from small acts of cruelty to giant acts of panic—from cuts in South Carolina’s
juvenile justice program, which will force young offenders out of group homes and into prison, to the decision by a
committee that manages California’s state spending to halt all construction outlays for six months.
… It’s true that the economy is currently shrinking. But that’s the result of a slump in private spending.It makes no
sense to add to the problem by cutting public spending, too.… The priority right now is to fight off the attack of the
50 Herbert Hoovers, and make sure that the fiscal problems of the states don’t make the economic crisis even worse.18
Aside from Krugman’s characteristic flair for the dramatic, the passages above are impressive because it would be
difficult to render a more misleading account of Hoover’s fiscal policies, without actually lying. First, Hoover did not
balance the budget—or even come close— in 1932. In Fiscal Year (FY) 1933 (running from July 1, 1932 through June 30,
1933), the federal government ran a deficit of $2.6 billion. To modern ears, that seems quite modest; Henry Poulson
handed out more to bankers by breakfast. But Hoover’s deficit was the result of spending $4.6 billion while taking in $2
billion in receipts. Thus, as a percentage of revenues, Hoover’s profligacy—which remember, Krugman is describing as
heartless budget slashing—was enormous. For comparison, in FY 2007 the federal government would have needed to run
a deficit of $3.3 trillion—rather than the actual deficit of $162 billion—to achieve the same proportion of overspending as
Hoover did in his allegedly tight-fisted years.
Yet we have only begun to scratch the surface of magician Krugman’s misdirection. The only reason the budget deficit
was so high—prompting Hoover’s tax hikes and budget cuts in FY 1933—was that Hoover had behaved as a model
Keynesian during his first two years in office. During every single year of the Roaring 20s, the federal government had
run budget surpluses, which it used both to justify Mellon’s bold tax cuts as well as to retire a large portion of the public
debt. (Following the massive borrowing needed for World War I, the federal government paid down its debt from $25.5
billion in FY 1919 to $16.2 billion in FY 1930.)19 When Hoover came into office, he inherited a sizable surplus of $700
million, which was a hefty sum in relation to a federal budget that was only $3.3 billion.…
Contrary to the impression Krugman gives,… Hoover’s response to the stock market crash was an enormous increase in
government spending, with the budget exploding by 42 percent over his first two years. This huge surge in spending
occurred amidst a collapse in receipts (due both to the de-cline in economic activity as well as falling prices).
Immediately after the crash, Hoover and Mellon also pushed through a temporary one-point reduction in tax rates,
applicable to the 1929 tax period.20 Hoover’s handling of the situation was therefore the textbook Keynesian response to a
collapse in “aggregate demand.”
It is true that eventually Hoover blinked and tried to tame the unprecedented (at the time) peacetime deficits. But this
was only after the “stimulus” approach failed horribly. By the time Hoover abandoned the textbook Keynesian remedies
of 1932, the unemployment rate had already surpassed 20 per-cent. Of course, Krugman could contend that this simply
proved how bad the situation was, and that Hoover had not been profligate enough with his unprecedented spending. Like
Hoover himself, Krugman misses the obvious explanation that the unprecedented federal intervention to fight the
17. Ibid.
18. Paul Krugman, “Fifty Herbert Hoovers,”New York Times, December 29, 2008, page A25, available at: http://nytimes.
com/2008/12/29/opinion/29krugman.html?partner= permalink&exprod=permalink (Accessed January 16, 2009.)
19. Bicentennial Edition: Historical Statistics of the United States, From Colonial Times to 1970, Series Y 335–338,
available at http://www2.cen-sus.gov/prod2/statcomp/documents/CT1970p2-12.pdf (Accessed January 17, 2009).
20. See the Tax Foundation, “U.S. Federal Income Tax Rates History, 1913–2009,” available at http://taxfoundation.org/
taxdata/show/151.html.
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Depression of the early 1930s were the cause of the unprecedented severity of the Depression.
During previous depressions in U.S. history, budge-conscious politicians had slashed spending in reaction to falling tax
receipts; they really did behave the way Krugman misleadingly portrayed President Hoover’s record. And yet, most
Americans cannot associate any of those presidents with their respective depressions, the way everyone knows that
“Hoover did nothing to fight the Depression.”
The Economic Facts of Life
During a depression, when every private citizen is cutting non-essential spending, the government should do so as
well.
As with the evaluation of Hoover’s high-wages policy, his high-federal-budget policy can be usefully contrasted with
the depression occurring at the end of Woodrow Wilson’s watch. With the conclusion of World War I, the U.S.
government slashed its budget from $18.5 billion in FY 1919 down to $6.4 billion one year later. As the U.S. economy
entered a depression at the turn of the decade, receipts fell. The Wilson Administration responded by cutting spending
even more, down to $5.0 billion in FY 1921 and then following with a single-year slash of 34 percent, down to $3.3
billion in 1922.21 (Because of the fiscal/calendar year mismatch, it is debatable whether Wilson or Harding should be
associated with the FY 1922 budget.)
So how do the two strategies stack up? We already know that Hoover faced 20+ percent unemployment after the second
full year of his Keynesian stimulus policies. Wilson/Harding, on the other hand, was Krugman’s worst nightmare, taking
the axe to federal spending in a way that would have given even Ron Paul the willies, and during a serious depression to
boot! Yet as we already know, unemployment peaked at 11.7 percent in 1921, then began falling sharply. The de-pression
was over for Harding, at the corresponding point when a desperate Hoover had decided to (try to) rein in his massive
budget deficits.
In fairness, we should concede that there can be no truly controlled experiments in the social sciences. It is theoretically
possible that Krugman’s interpretation of history is correct. Presumably he would argue that the 1920–21 depression was
exacerbated (or perhaps even caused) by the enormous cuts to government spending. And he might further argue that
Hoover’s profligacy averted unemployment rates of, say, 40 percent in 1931.
But Occam’s Razor recommends the simplest answer star-ing us in the face: the old-school economic wisdom was
correct, while the newfangled Keynesian remedies proved disastrous. (For what it’s worth, Coolidge never let federal
spend-ing exceed $3.3 billion, even though he presided over the most prosperous decade in U.S. history.)22 During a
depression, when every private citizen is cutting nonessential spending, the government should do so as well. The
experience of the Harding and Coolidge administrations reminds us that Americans used to treat government as a (huge)
business; it could run up debts during emergencies such as war, but then it had to pay them off as a matter of fiscal
responsibility. This sounds quaint nowadays, brainwashed as the pub-lic has been by Keynesian arguments that during
periods of belt-tightening, it is the government’s duty to spend like a drunken sailor.23
Yet we are still not finished undoing the false impression Krugman’s essay has given. (His short op-ed is an excellent
“make-work” program for those trying to accurately describe the Hoover years.) We now know that Hoover’s initial
response to the crash was to let federal spending (and the deficit) explode, a strategy that coincided with awful results, in
contrast to the classical strategy of belt-tightening which had eliminated almost all earlier U.S. depressions in the same
time frame. But even so, couldn’t Krugman correctly point out that Hoover’s change of heart in 1932 made things worse?
After all, … the federal deficit fell slightly from FY 1932 to FY 1933, yet the economy reached the depths of the
Depression during this same period. Wasn’t it obviously a bad idea for Hoover in 1932 to suddenly get anxious about the
federal debt?
To get a full picture of what happened at this lowest of points in U.S. economic history, we need to explore just how
Hoover tried to balance the budget. Krugman’s quick treatment gives the impression that it was all (heartless) budget cuts.
On the contrary, from FY 1932 to FY 1933, the federal budget was cut some $61 million (1.3 percent), while federal
receipts increased around $73 million (3.8 percent). Thus, of the slight fall in the (huge) deficit, only 45 percent was due
to budget cuts, while the remaining 55 percent was achieved through wringing more out of the taxpayers. Funny,
Krugman didn’t mention that Hoover raised taxes more than he cut spending when trying to balance the budget.
It gets worse. The figures above convey the impression that Hoover sought a roughly equal mix of tax hikes and budget
cuts in order to rein in the red ink. This is completely wrong. It’s not as if he bumped up the excise tax on whiskey by 4
percent, and so few extra points of revenue trickled in. On the contrary, Hoover signed into law enormous increases in the
rates of various taxes. He probably expected tax receipts to go through the roof. But because of the Laffer Curve—where
a tax rate increase may yield a much smaller increase in collected revenues, because of the shrinking tax base—the extra
yield to the Treasury was modest.
Hoover’s tax hikes were astounding. They would have been unconscionable for a president to impose during a period of
prosperity; for Hoover to have done so when he did—well, it’s no wonder that the period immediately following this
decision is the worst in U.S. economic history. As Rothbard describes it:
In his swan song as Secretary of Treasury, Andrew Mellon advocated, in December, 1931, drastic increases of taxes,
21. Bicentennial Edition: Historical Statistics of the United States, From Colonial Times to 1970, Series Y 335–338,
available at http://www2.cen-sus.gov/prod2/statcomp/documents/CT1970p2-12.pdf (Accessed January 17, 2009).
22. Ibid.
23. See for example, Paul Krugman “Deficits and the Future,” New York Times, December 1, 2008, page A29, available
at: http://nytimes.com/2008/ 12/01/opinion01krug man.html?_r=1&partner= rssnyt&emc=rss. (Accessed on January 17,
2009.)
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including personal income taxes,and postal rates. Obedient to the lines charted by Mellon and Hoover, Congress
passed, in the Revenue Act of 1932, one of the greatest increases in taxation ever enacted in the United States in
peacetime. The range of tax increases was enormous. Many wartime excise taxes were revived, sales taxes were
imposed on gasoline, tires, autos, electric energy, malt, toiletries, furs, jewelry, and other articles; admission and
stock transfer taxes were increased; new taxes were levied on bank checks, bond transfers, telephone, telegraph, and
radio messages; and the personal income tax was raised drastically as follows: the normal [brackets were] increased
from [an original] range of 1 1/2 percent—5 percent, [up to a new range of] 4 percent—8 percent; personal
exemptions were sharply reduced, and an earned credit of 25 percent eliminated; and surtaxes were raised
enormously, from a maximum of 25 percent to 63 percent on the highest incomes. Furthermore, the corporate income
tax was increased from 12 percent to 13 3/4 percent, and an exemption for small corporations eliminated; the estate
tax was doubled, and the exemption floor halved; and the gift tax, which had been eliminated, was restored, and
graduated up to 33 1/3 percent.24
Paul Krugman is right to warn politicians not to repeat the fiscal mistakes of Herbert Hoover. Hoover showed that huge
increases in federal spending wouldn’t rescue an economy from depression, and that massive tax hikes only added insult
to injury. At the risk of boring the reader, we point out once again that Treasury Secretary Mellon pursued the opposite
program in the 1920s, and the result was prosperity.
FDR Was Right—But Then What Did He Do?
In the 1932 presidential race, Franklin Roosevelt railed against his opponent’s spending, calling the Hoover
Administration “the most reckless and extravagant past that I have been able to discover in the statistical record of
any peacetime government anywhere, any time.” (Quoted in Burton Folsom, Jr., New Deal or Raw Deal?, 40.)
Making the Depression Great, Step 4: Install a New Deal-Lite
We have seen that Herbert Hoover departed drastically from the laissez-faire policies attributed to him by most modern
Americans. Yet the irony runs deeper, for Hoover’s strategy for fighting the Depression looks very similar, if in scaleddown form, to FDR’s New Deal that allegedly “got us out of the Depression.” With some notable exceptions (such as
their positions vis-à-vis the gold standard), FDR’s plan for recovery could be described as Herbert Hoover Squared. A
brief discussion of Hoover’s farm supports, public works expenditures, and Reconstruction Finance Corporation—which
were only part of Hoover’s New Deal Lite—will suffice to make the point.
Murray Rothbard argues that if one looks at content, rather than labels, then a fair case can be made that the “New
Deal” program of farm intervention began under Herbert Hoover, not Franklin Roosevelt. Hoover had supported the farm
bloc throughout his political career, and during his first presidential campaign promised he would institute a price-support
program. He proved true to his word in June1929 (three months after he was sworn in as president) with the creation of
the Federal Farm Board (FFB). The FFB was initially allocated $500 million to give low-interest rate loans to farm
cooperatives, and it also had the power (through corporations that it created) to buy surplus farm products off the market
and hence prop up their prices. (Hoover won an additional $100 million for the FFB in the spring of 1930.)25
Good Advice
“Issuing more government debt for huge public works programs “would encroach seriously, and perhaps dangerously
upon the supply of capital funds that private enterprise will need in order to help the country climb out of depression
again.”—Metropolitan Life Insurance Company economist William A. Berridge, 1932. (Quoted in Murray N.
Rothbard, America’s Great Depression, 293.)
Bad Adice
“Just as we saved our way in to depression, we must squander our way out of it.”—Business Week economist Virgil
Jordan, 1932. (Quoted in Murray N. Rothbard, America’s Great Depression, 291.)
As usual, throwing tax dollars at the problem only made it worse. In a market economy, if a particular group of
producers, even the cherished farmer, can’t make a living, then it means there are too many people in that line of work.
Heartless as it sounds, the only sustainable solution to the problem of inadequate farm income was for the least efficient
farmers to find other careers. Actual and promised government “support” allowed these marginal producers to limp along,
so that there really was overproduction in the subsidized crops. (This is different from the belief of Hoover and others that
the Depression was due to a general overproduction. The FFB actually channeled too many resources into farming,
leading to overproduction in that sector but underproduction elsewhere.) Realizing that its practice of “buy high, sell low”
was wasting tax dollars, and that the price supports were leading to ever-growing stockpiles in government silos, the FFB
took the next “logical” step of ordering output restrictions (while maintaining price supports!). Rothbard describes the
results of this attempt to overturn economic law:
[C]onfronted with growing surpluses, and therefore heavier pressure on farm prices … the FFB tried to exhort the
cotton farmers … To reduce acreage. Chairman Stone, of the FFB, urged the governors of the cotton states to
“immediately mobilize every interested and available agency … to induce immediate plowing under of every third
row of cotton now growing.” This action stirred up a host of indignant opposition, the New York Times calling it “one
of the maddest things that ever came from an official body.” The proposal met with no success; in fact the 1931
cotton crop was considerably larger. In early 1932, the Board then tried an heroic action—along with its 1.3 million
24. Murray N. Rothbard, America’s Great Depression, Fifth Edition (U.S.A.: The Ludwig von Mises Institute, 2008),
286–87.
25. Ibid., 227 and 229.
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bales, it obtained an agreement from southern bankers to withhold all of their cotton (3.5 million bales), while it
continued to finance 2.1 million bales held by the coops. This firmed prices until June 1932, when they fell
drastically again. By July, the Board had bought $127 million worth of cotton, and it had lost over half of its value.
The upshot was that the [Cotton Stabilization Corporation] had to give up, and it began to liquidate its cotton
holdings in August, 1932, completing its unloading in a year. The net loss of cotton was $16 million, in addition to
850,000 bales, worth over $78 million, donated to the Red Cross.26
Generous subsidies and output restrictions in agriculture were not the only components of Hoover’s New Deal Lite. At
this point, it should not surprise the reader to learn that within weeks of the stock market crash, Hoover spearheaded a
massive increase in public works spending. On November 23, 1929, he sent a telegram to all of the governors, and won
their cooperation in expanding state-level spending. On the federal level, Hoover asked Congress to boost the budget of
the Federal Buildings program more than $400 million, and also requested an additional $175 million (for public works
projects) for the Shipping Board. Hoover did all of this before year’s end, prompting Columbia economics professor J. M.
Clark to praise the president’s “great experiment in constructive industrial statesmanship of a promising and novel sort.”27
In July 1930, Congress authorized an enormous $915 million public works program,28 which as a percentage of the
economy translates to $149 billion in 2007. Rothbard notes that the older Hoover “still points out proudly that the
aggregate public works of the four years of his administration was greater than the public works in the entire previous 30
years,” and that Hoover, “still takes credit for launching, in this period, Jones Beach, the San Francisco Bay Bridge, the
Los Angeles Aqueduct, and Boulder [Hoover] Dam.”29
We come to our last exhibit in the case for Hoover’s New Deal Lite: the Reconstruction Finance Corporation. Suppose
100 American college seniors were asked, “During the 1930s, which American president established the Reconstruction
Finance Corporation, which lent $1 billion in its first five months of operation to prop up unhealthy banks and railroads?”
Probably not one would answer, “Herbert Hoover.”
Created in early 1932, the RFC was an important plank in Hoover’s recovery plan. In that year it extended credit of
$2.3 billion, and advanced more than $1.5 billion in cash.30 The program, flawed in itself, was made worse by the almost
inevitable corruption attending Hoover’s pet program. Historian Burt Folsom writes:
When Hoover used $1.5 billion of taxpayer money to pick winners and losers of special government loans, the
process was quickly and inevitably politicized. Those with the right political connections found themselves at the
head of the line. For example, the treasurer of the Republican National Committee received a loan of $14 million for
his bank in Cleveland. In one of the worst cases, Charles Dawes, the head of the RFC (and a former Republican vice
president) resigned from the RFC just in time to win a $90 million loan for his Chicago bank. Hoover’s
administration, therefore, was so mired in questionable economic decisions that it had no credible offensive against
Roosevelt [in the 1932 campaign].31
Herbert Hoover: A Big Government Man
The idea that Herbert Hoover was a staunch small-government man is a complete myth. (The one area where he was a
small government man is one not often mentioned by his liberal critics: he wanted defense spending and military
interventions kept to a minimum.) Hoover consciously, proudly, broke ranks with laissez-faire economists and with every
president before him, implementing the largest peacetime expansion of government in U.S. history (at least to that point).
In the midst of a depression, he propped up wage rates to help the working man, only to produce the largest glut on the
labor market in its history—something that any competent economist could have predicted. So where did the myth of the
laissez-faire Hoover come from? Was it fabricated out of whole cloth?
Not really. For one thing, in the 1932 presidential campaign, Herbert Hoover really was the more “conservative” of the
candidates—though this proves little since his opponent was a fascist (and I am using that loaded and overused term in its
strict economic definition)—and Hoover feared for the nation if it followed the course that the charismatic FDR was
charting.32 It is also true that during his administration, Hoover resisted calls for direct relief to the unemployed from the
federal government; Hoover preferred that local governments and voluntary charities help the indigent. Reading his
memoirs, one gets the sense that Hoover—unlike the Court-packing FDR—took seriously the limits of the U.S.
Constitution, even if he felt the federalist system handcuffed his efforts to “do something” (such as curbing the stock
market bubble when he first took office33). Finally, modern-day critics of Hoover are certainly correct to accuse him of
subordinating other policy aims to maintenance of the gold standard—though this desire to uphold Uncle Sam’s
obligations to creditors and all holders of dollars is surely a virtue on Hoover’s part.
In truth, Herbert Hoover was not the dogmatic right-winger taught in many history classes, but neither was he a central
planner. Indeed, Herbert Hoover’s views on the proper role of the federal government are remarkably “modern,” in
26. Ibid., 232.
27. This section is drawn from Murray N. Rothbard, America’s Great Depression, Fifth Edition (U.S.A.: The Ludwig von
Mises Institute, 2008), 216–17.
28. Ibid., 239.
29. Ibid., 295.
30. Ibid., 299.
31. Burton Folsom, Jr., New Deal or Raw Deal? How FDR’s Legacy Has Damaged America (New York: Threshold
Editions, 2008), 39.
32. For more on this point, see Jonah Goldberg, Liberal Fascism: The Secret History of the Left, from Mussolini to the
Politics of Meaning (New York: Doubleday, 2008).
33. Herbert Hoover, The Memoirs of Herbert Hoover: The Great Depression, 1929–1941 (New York: The Macmillan
Company, 1952), 17.
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contrast to some of the truly extreme elements of the Roosevelt Administration who looked with approval on the model of
Soviet Russia, something Hoover certainly did not. Hoover’s nuanced worldview is summed up well in the following
excerpt from his correspondence of February 1933:
We can say, without qualification, that the motivation of production based on private initiative has proved the very
mother of plenty. It has faults, for humanity is not without faults. Difficulties arise from overexpansion and
adjustment to the march of labor-saving devices, but in broad result it stands in sharp contrast with the failure of the
system of production, as in its greater exemplar—Russia—where after fifteen years of trial, in a land of as great
natural resources as ours, that system has never produced in a single year an adequate supply of even the barest
necessities in food and clothing for its people.…
[Our] system moves supplies of everything into remotest villages and crossroads; it feeds and clothes great cities
each day with the regularity and assurance which cause never a thought or anxiety.The diffusion of commodities and
services in a social sense has faults. In normal times out of our 120,000,000 people there are a few millions who
conscientiously work and strive, yet do not receive that minimum of commodities and services to which they have a
just right as earnest members of the community.
There is another fringe of a few hundred thousand who receive more than they deserve for the effort they make. But
taxes are furnishing rapid correction in this quarter.… The enlarging social sense of our people is furnishing the
impulse to correction of faults.… It is not to be brought about by destruction of the system.34
Sounds like Obama
“[W]e might have done nothing. That would have been utter ruin. Instead, we met the situation with proposals to
private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved
in the history of the Republic. We put it into action.”—Herbert Hoover’s acceptance speech for the Republican 1932
presidential nomination.
Who Needs Keynes When You Have Hoover?
“I determined that it was my duty, even without precedent, to call upon the business of the country for coordinated
and constructive action to resist the forces of disintegration. The business community, the bankers, labor, and the
government have cooperated in wider spread measures of mitigation [relief] than have ever been attempted before.…
Our leading business concerns have sustained wages, have distributed employment, have expedited heavy
construction. The Government has expanded public works, assisted in credit to agriculture, and has restricted
immigration. These measures have maintained a higher degree of consumption than would otherwise have been the
case. They have thus prevented a large measure of unemployment.… Our present experience in relief should form the
basis of even more amplified plans in the future.”—Herbert Hoover, address to American Bankers’ Association,
October 1930. (Quoted in Murray N. Rothbard, America’s Great Depression, 244–45.)
Doctor’s Orders
“[T]he proper injunction to government in a depression is cut the budget and leave the economy strictly alone.” —
Murray Rothbard, America’s Great Depression.
Labor Unions Heart Hoover
“The President’s conference has given industrial leaders a new sense of their responsibilities.… Never before have
they been called upon to act together … [I]n earlier recessions they have acted individually to protect their own
interests and … Have intensified depressions.”—Editorial in the American Federationist, January 1, 1930, a labor
union publication touting how Hoover was different from bad old laissez-faire presidents of the past. (Quoted in
Murray Rothbard, America’s Great Depression, 213–14.
Books You’re Not Supposed To Read
• America’s Great Depression, Murray N. Rothband, Fifth Edition (U.S.A.: The Ludwig von Mises Institute, 2008)
• Out of Work: Unemployment and Government in Twentieth-Century America, Richard K. Vedder and Lowell E.
Gallaway (New York: New York University Press, 1997)
• The Memoirs of Herbert Hoover: The Great Depression, 1929–1941, Herbert Hoover (New York: The Macmillan
Company, 1952)
34. Ibid. 24–25.
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